Oilpatch seethes over new environmental rules for pipelines: ‘Deeply disappointing’

CALGARY – Many in the oilpatch are quietly seething over Ottawa’s announcement that decisions on the Energy East and Trans Mountain pipelines will be delayed as it studies the projects’ contributions to greenhouse gas emissions.

The two companies proposing the pipelines, TransCanada Corp. and Kinder Morgan Inc., were diplomatic in their responses to the new approval rules announced Wednesday, saying they had “concerns” about the delays. But industry executives and politicians in Alberta, as well as financial analysts who follow the sector, have been more vocal about the negative consequences.

The transitional rules for pipeline applications, which will be in effect until Prime Minister Justin Trudeau’s government develops permanent regulations for natural resource projects, are also expected to include a climate assessment.

“I would describe this announcement as not surprising but deeply disappointing, and a discouraging signal to investors at a time when Canada is facing a flat-lined economy,” Explorers and Producers Association of Canada president Gary Leach said in an email.

It is an extremely intensive, arduous, and expensive process involving a staggering number of man hours, a wide range of expertise and years of consultations.

“From our perspective, this was more a case of political grandstanding and a not so subtle move to wrestle control of natural resources away from the province,” AltaCorp Capital analyst Dirk Lever said in a strongly worded note to clients on Thursday. “Where is the next Peter Lougheed?”

The reference is to Lougheed, the late former premier of Alberta who sparred with former prime minister Pierre Elliot Trudeau over the federal government’s National Energy Program.

“Anyone involved with the pipeline application process will tell you it is an extremely intensive, arduous, and expensive process involving a staggering number of man hours, a wide range of expertise and years of consultations,” Lever wrote.

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Like Lever, many the oilpatch took issue with the view expressed by Natural Resources Minister Jim Carr and Environment Minister Catherine McKenna at their Wednesday press conference, when they said the federal government needed to “restore the public trust in the way Canada reviews and assesses major resources projects.”

The ministers announced that the department of environment and climate change would study the greenhouse gas emissions of oil and gas projects that would feed into the Trans Mountain and Energy East pipelines as part of their regulatory assessment of those pipelines. A climate change assessment would also apply to projects upstream from liquefied natural gas facilities.

Wildrose Party leader Brian Jean blasted the announcement as “more red tape and more delays” and said in a statement, “the National Energy Board pipeline review process is one of the most thorough in the world, and I’m discouraged that today’s announcement will further delay these common sense decisions on projects that will benefit Canada’s economy.”

FirstEnergy Capital Corp. analyst Steven Paget noted in a report Thursday that the federal government retained the ability to make a final decision on pipeline projects, and worried about the process becoming an increasingly political decision by Ottawa.

“We would argue the real difficulty is that the process might simply be getting more politicized. If that happens, decisions on these projects will not be made by merit, but by the political inclination of the government of the day,” he said.

Some energy experts praised Ottawa’s new plan.

University of Alberta energy economist Andrew Leach says studies show pipelines are likely to increase oilsands production by a small amount.
That will also increase greenhouse gas emissions.

He and Mark Jaccard at Simon Fraser University say the real question will be how much is too much.

Jaccard says those decisions can only be made in the overall context of Canada’s greenhouse gas targets and will have to include provinces and industries across Canada.

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